Interbet

It's illegal, but online gambling mushrooms anyway

Jeff Smith, Rocky Mountain News

Published January 30, 2006 at midnight

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Matt Meyer started playing poker on the Internet about three years ago, just before he was old enough to go to casinos.

"It says you had to be 18, but it's not like a casino where they can card you or anything," said Meyer, who lived in Texas at the time.

He played two to six hours of Internet poker a day. After his 18th birthday, he also started playing live poker games, making as much as $6,000 one month.

Today, Meyer, 21, is taking classes at Front Range Community College and Colorado State University while playing poker and making occasional sports bets online on the side. He estimates he made about $7,000 from online gambling last year and about that much playing live poker.

Internet gambling is flourishing even as authorities claim it is illegal - in part because prosecutions are difficult and rare. This year, online gambling houses will rake in an estimated $15.2 billion worldwide, a fivefold increase from about $3 billion in 2001, according to the New York consulting firm Christiansen Capital Advisors, one of the foremost industry watchers.

While Internet casinos tend to be offshore where the operations are legal, "about half of the revenue comes from (players living in) the U.S.," said Sebastian Sinclair, a researcher for Christian- sen Capital. Analysts estimate as many as 6 million Americans gamble online.

The trend has gone far beyond sports and poker. BetCRIS.com Sportsbook reports that 40 percent of its customers place bets on celebrities - such as who will host the Academy Awards, when Angelina Jolie will marry Brad Pitt, and when other rich and famous will get pregnant, make up or break up.

But this week, the focus will be on the Super Bowl, as more money is bet on the NFL football championship than any other sporting event. Many of those wagers will be made online.

Meyer, a Pittsburgh Steelers fan, said he will probably take the favored Steelers against the Seattle Seahawks if the spread stays under a touchdown. But he doesn't plan to bet more than $50.

"I don't spend a whole lot of money on sports betting, the odds really aren't in your favor," said Meyer. With poker, "you're making money off other people, so there's not so much of a house advantage."

Kristen Hubbell, spokeswoman for the Colorado attorney general's office, gives another reason for consumers to be cautious about betting online.

"One thing consumers want to keep in mind is there is absolutely no recourse for them," Hubbell said. "If they lose money or if their winnings don't come in, there's nothing they can do about it because online gambling is illegal."

Meyer said he has learned to avoid Internet sites, sometimes referred to as poker cheats, where his opponents are "robots" or computerized programs.

Lawmakers haven't passed a specific law against Internet gambling. But the Justice Department says federal laws such as the 1961 Wire Wager Act, which prohibits using telephone lines to place bets, applies to online wagering.

In 2000, federal prosecutors won a conviction against a San Francisco businessman who operated an Internet-based casino on the Caribbean island of Antigua. Prosecutors proved during a two-week trial that Jay Cohen had solicited American gamblers to place bets on his World Sports Exchange Web site and via a toll-free 800 number.

Cohen served 17 months in federal prison. Although others have pleaded guilty or been charged in Internet casino cases, Cohen is the only defendant to go to trial in the U.S., according to Interactive Gaming News.

The U.S. has sporadically tried to crack down on Internet casino advertising. In the most recent case, The Sporting News earlier this month agreed to pay a $4.2 million fine and launch a $3 million public-service campaign to settle federal charges it had run illegal online gambling advertising.

Meyer said he knows Internet gambling may not be technically legal, "but I don't really worry about it honestly."

Reflecting the gap between the government's stance and reality, U.S. investment houses hold hundreds of millions of dollars of shares in Internet casinos, The New York Times recently reported.

Keith Furlong, deputy director of the Interactive Gaming Council in Vancouver, British Columbia, said the industry trade group believes regulation is the way to go.

"Our contention is that regulation is a far better means to achieve goals such as protection for underage players, education, assistance to compulsive gamblers and to prevent money laundering," said Furlong.

Furlong noted that nations such as the United Kingdom are moving to regulation and strict licensing, "and with that comes revenues from taxes."

In Colorado, Hubbell said Colorado Attorney General John Suthers leaves prosecution of the state's gambling laws up to the discretion of local district attorneys and law enforcement officials.

In the most publicized example recently of a crackdown on live gambling, a police SWAT team swooped into a restaurant in Palmer Lake near Colorado Springs in the spring of 2005 and arrested 22 people playing Texas Hold 'Em poker.

Ultimately, the charges were dismissed, with most agreeing to make a $50 donation to a nonprofit organization. Prosecutors also agreed to dismiss charges against the restaurant's owner and wife as long as they stayed out of trouble for a year, and the owner spoke at three public meetings.

District Attorney John Newsome reportedly said he preferred to educate the public, rather than spend resources cracking down on violators.

Federal prosecutors over the years have testified to congressional lawmakers that they fear Internet gambling has the potential to corrupt youth, lead to compulsive gambling, and fuel potential fraud, money laundering and organized crime.

One of the biggest battles has been waged between the U.S. and Antigua, a banana and sugar producer turned Internet-gambling mecca.

After the U.S. cracked down on Cohen and others, Antigua began losing casinos to other offshore locations. Antigua complained to the World Trade Organization that the U.S. had violated a 1993 trade agreement ensuring that its recreational services not be unfairly restrained. The WTO essentially agreed the U.S. can't block Antigua from offering Internet gambling even if it is illegal here.

But the battle may not be over. Western Union recently temporarily closed its money-transfer office in Antigua to do a "compliance audit." Gambling industry sources and the Antigua press speculate the audit may be related to U.S. efforts to crack down on Internet gambling. Experts say compliance audits often are conducted to review unusual transactions or investigate possible evidence of money laundering.

Lori Varsames, spokeswoman for Greenwood Village-based First Data Corp., which owns Western Union, last week declined to address the speculation that the closure is related to Internet gambling. (First Data announced on Thursday that it intends to spin off Wester Union into an independent company.) She said only that a routine review of the Antigua office "identified certain circumstances which required further attention. . . . It would be inappropriate for me to characterize any of our findings until the review is complete."

In any case, it's unlikely the U.S. will be able to stand in the way of continuing growth in Internet gambling.

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